The Bitcoin protocol upgrade that separated signatures from transaction data was SegWit, short for Segregated Witness.
SegWit was implemented as Bitcoin Improvement Proposal 141 and activated on August 24, 2017. It changed the transaction format by moving witness data—including signatures and unlocking scripts—outside the transaction’s traditional data structure. This let Bitcoin count witness bytes differently when calculating block capacity.
The upgrade addressed transaction malleability, a problem in which signatures could be modified without invalidating a transaction, potentially changing its transaction ID. That mattered for systems built on chains of unconfirmed transactions, including payment-channel technology.
SegWit is often confused with Lightning Network, but they are not the same thing. SegWit was a Bitcoin protocol upgrade; Lightning is a separate, off-chain payment network that benefited from SegWit’s malleability fix. Taproot was another later Bitcoin upgrade, activated in 2021.